Singapore-based Terraform Labs, Do Kwon agree to settle US civil fraud case
Sign up now: Get ST's newsletters delivered to your inbox
The SEC had accused Terraform Labs and Do Kwon (above) of misleading investors in 2021 about the stability of stablecoin TerraUSD.
PHOTO: REUTERS
Follow topic:
New York – Singapore-based Terraform Labs and its founder Do Kwon have reached a tentative settlement with the US Securities and Exchange Commission (SEC), which sued them for allegedly misleading cryptocurrency investors before the 2022 collapse of stablecoin TerraUSD.
The deal, but not its terms, was disclosed on a court website on May 30. A jury found Kwon and Terraform Labs liable on civil fraud charges at trial in April.
The SEC had accused the company and Kwon of misleading investors in 2021 about the stability of TerraUSD, a stablecoin designed to maintain a value of US$1. The regulator also accused them of falsely claiming that Terraform’s blockchain was used in a popular South Korean mobile payment app.
US District Judge Jed Rakoff in Manhattan asked the SEC and the defendants to file papers supporting the settlement by June 12.
An SEC spokesperson and attorneys for the defendants declined to comment.
The collapse of TerraUSD and Luna, a more traditional token that fluctuated in value but was closely linked to TerraUSD, roiled cryptocurrency markets in May 2022.
The SEC has estimated that investors in the two cryptocurrencies lost more than US$40 billion (S$54 billion) combined when the TerraUSD peg to the dollar could not be maintained.
The regulator had asked Judge Rakoff in court filings to make Kwon and Terraform Labs relinquish US$5.3 billion in what it called ill-gotten gains from sales of the stablecoin.
The SEC also sought a US$420 million fine on the company and a US$100 million fine for Kwon, and for both to be banned from dealing in “crypto asset securities”.
The cryptocurrency entrepreneur and his company had argued that the maximum fines allowed were US$3.5 million on Terraform Labs and less than US$1 million for Kwon.
Kwon faces related criminal charges in the United States and his native South Korea. He has denied wrongdoing.
Since his arrest in March 2023,
